How To Create A Budget

Dried Lemon Pie Chart by jglitten
A lot is made of budgeting, but there are differing opinions about the best way of creating one. Some people have categories that are too broad, and others have too many categories, which makes goals difficult to meet month after month. Here, I’ll detail how I made my budget and how I continue to maintain it each month.

Your budget does not need to be perfect. At first, you just want to get a sense of what you spend your money on each month, and later you’ll adjust it to your needs. You don’t need to nail your projected number on the nose. Rather, it’s a guideline to follow.

  • Start by going to Mint.com and signing up. It will pull data from your bank accounts and give you a clear sense of how much you’ve earned and how much you’ve spent over the past 3 months. The trends page shows how you spend your money. (Look through the transactions. You may have to tweak some of the categories so it knows that the check sent every month to Mrs. Robinson is for rent, not shopping.)
  • Go to the planning page and create budgets for specific categories. Housing, utilies, food, car and loan payments, and entertainment are good places to start. You should include all types of spending, fixed and variable.
  • Set a “miscellaneous expenses” category. Double it. No matter how much you think you spend at the corner store, you’re forgetting something. Presents, haircuts, and light bulbs need to be included somewhere! There are lots of other small expenses we often forget about, so we should keep a good buffer in place.
  • Review each month. If you see you aren’t using all of your shopping money, decrease the budget for that category. If you’re going over your entertainment budget, either cut back or increase it slightly.
  • If your expenses are higher than your income (or if you want to save more money) cut down in one of your variable categories, such as food, shopping, or miscellaneous expenses. Lower your eating out budget if you want to save extra, and stick to it.
  • The only “category” that matters is saving. Always make sure that your expenses are below your income.

We all have to do what works for us. Find your priorities and cut down spending in your other categories. You will be able to spend your money on the things that are important, while still saving for other goals.

Set goals for each month. If you want to save $300, set your budget to $300 less than your income, and see if you can hit it. Who cares if you overspend in one category if you’re making your ultimate goal: saving money!

My budget has worked very well for me. I’ve learned that I don’t do very much shopping and that I wasn’t planning for enough random expenses. By budgeting, we tell ourselves which categories we are willing to splurge on and which we want to cut back on. Good luck, and get started today!

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